AI in Performance Management: Transforming Employee Growth and Engagement

AI has the power to revolutionize performance management, transforming it from a time-consuming administrative task into a strategic function that drives a high-performance culture and business success.

This article dives into the core applications of AI in performance management, from analyzing strengths and forecasting outcomes to fostering employee development. Drawing insights from People Ops experts, we’ll explore how AI empowers HR teams to not only optimize performance but also drive engagement, fairness, and continuous growth.

What is AI-powered performance management?

AI-powered performance management is a process through which you can use artificial intelligence to make better decisions about how your employees perform now and in the future. 

It commonly involves measuring performance by considering far more factors than a simple rating or score. 

Plus, by using AI, you can better identify areas where an employee might need improvement and uncover strengths they might not even realize they have.

Note: It's essential to distinguish between performance management and performance measurement. The latter aims to quantitatively or qualitatively assess performance against set goals and objectives. 

On the other hand, performance management focuses on a more holistic approach to managing performance, encompassing a range of activities such as goal-setting, coaching, feedback, and recognition.

AI in performance management: Key applications

In a healthy organization, performance management goes beyond classic performance reviews by including strategies for improving performance. It is worth nothing that AI is only meant to be a tool that speeds up your work and improves accuracy. That being said, for all these applications, you'll need a human opinion and a real person in charge of managing the process and handling tasks AI can't take care of successfully (like meeting up with employees).

Identifying successful vs. unsuccessful employees 

You can tweak your recruitment and performance development processes by understanding which team members are successful and which are not. 

Knowing precisely what's boosting their performance or slowing them down allows you to tweak your workplace policies to ensure they won't hinder employee performance. 

Plus, you can enlist successful employees as mentors and on-team coaches. In contrast, those not performing as expected can receive additional training to help them reach their goals. 

For this, an AI system lets you track performance and behaviors against set success criteria. In turn, you'll be able to provide feedback and coaching, reward success, and prevent potential mishaps due to poor performance.

Strength and weakness analysis

Similar to seeing which employees are performing well and which ones need a little nudge, you can use AI performance management systems to get a detailed list of their top skills. 

A skills matrix, for instance, will give you a detailed look at your team's skills to spot strengths, talent density, and development opportunities. This makes for a fair and validated assessment without the manual work.

AI-powered goal setting and KPI alignment

Generative AI can automatically tailor goals and key performance indicators (KPIs) to each role and industry, ensuring precision and relevance. This alignment helps in setting clear expectations and tracking progress effectively.

Additionally, artificial intelligence has reached a stage where it can analyze past data to give you recommendations for KPIs (key performance indicators) worth tracking. 

On top of this, they assist you with real-time analysis in measuring employee progress to see if you're set to hit your KPIs on time.

Analyzing past performance data and predictive analysis 

But it doesn't end with KPIs. AI-based tools can help you see how long a person will take to finish a task, even if they're likely to postpone it. 

Time tracking tools, for instance, rely on AI to make better predictions on an individual's performance in time. 

Many human resources information systems have predictive analysis tools to automate performance tracking and reporting. Some will go one step further and recommend initiatives that can help you improve an employee's performance.

Offering a complete, AI-generated performance analysis 

It's challenging to keep up with employee performance and consider every piece of feedback. Imagine you're a manager with ten direct reports. You have to look through a self-review and four peer reviews for each reviewee. 

That means 50 reviews per feedback cycle. And suppose some of those reviewees also happen to be team leaders. In that case, you might need to consider some additional input from their direct reports. 

And you would have to summarize all input into a report to discuss during your performance review meeting. That is a lot of work.

But what if there were a way to summarize all feedback from all sources automatically? AI can speed everything up by analyzing employee feedback even when you're away. You'll then get a report of this performance for each individual report.

Linking areas of development with concrete steps and training resources 

But what happens once you have feedback results? For many companies, not much. Some people receive promotions, others might receive performance improvement plans, and it stops there. 

But performance management is more than just rating performance and sharing feedback. There has to be a next step involved. One common such "next step" is training related. 

So if you've ever wanted to connect the dots between people skills, career progression plans, and training opportunities, AI does just that. You could let these tools instantly create employee development plans plans and define the steps for career progressions.

AI performance coaching

AI-driven nudges are proven to improve performance for both employees and supervisors. 

And their capabilities are endless. 

A particularly useful tool would be an AI coach linked to your Slack or Microsoft Teams workspace to share productivity tips, answer queries, and offer support for solving all kinds of problems. It can also help employees write feedback, find better learning resources, or establish development goals.

Providing advanced predictive analytics

By analyzing historical performance data, AI can predict future trends, identify potential high performers, and flag employees at risk of underperforming or leaving the organization.

This foresight enables proactive interventions and strategic talent management.

What are the benefits of using artificial intelligence in performance management?

While using AI for performance management is still in its initial stages, HR and People Ops leaders have already identified its benefits:

• Reducing human error and improving the accuracy of performance data collection
• Being able to provide real-time feedback to employees
• Offering personalized performance improvement suggestions
• Predicting employee performance with higher accuracy
• Creating actionable and motivating employee development plans and an improved employee experience
• Increasing employee productivity and engagement over time

Future trends for AI in performance management

Using artificial intelligence in performance management is expected to look different with each passing year as more and more new tools are getting out there. 

Sometimes faster than we can even adopt them. So we talked to a couple of AI and People Ops experts to get their own predictions on the future of AI for managing employee performance.

Emanuel Williamson, AI Advisor at Employ, says that one key future trend for AI in performance management is the exciting integration of natural language processing and sentiment analysis:

Emanuel also notes that leveraging AI algorithms for real-time feedback and personalized recommendations enhances employee development and drives continuous growth. 

The potential of AI in performance management is immense, offering opportunities to boost productivity, engagement, and organizational success.

On the same feedback note, Felicia Shakiba, Founder of CPO Playbook Consultancy, remarks that AI has the potential to challenge managers and promote fair practices by encouraging them to provide less biased and more objective feedback:

Marek Nebesář, Operations Director at Behavio Labs, observes that the trend that will bring the highest value to his team in terms of AI-driven performance management is undoubtedly assistance with learning and development:

Enable higher employee performance and motivation with Deel Engage

There are hundreds of different ways of tracking and improving employee performance. So you need one unified tool for managing employee growth, performance, and feedback. 

Deel Engage connects all these elements beyond what you can handle manually:

1. No more feedback collected with no change
2. No more development plans made just for checking some boxes
3. No more untapped people potential.
4. No more teams drowning in manual tasks 
5. No more boring training plans that don't improve employee knowledge and competencies
6. No more disconnected people processes

The AI assistant will fast-track key processes (such as defining role expectations, launching feedback reviews, and writing actionable feedback), and bind all the key performance management processes together.

Book a demo of our AI-powered talent management suite for job performance management, employee development, and more.